We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.

Friday, March 7. 2014

I swim at my own risk routinely. I drink a couple of Coronas with limes, then jump off the boat in the middle of Nantucket Sound to swim with the Bluefish and the sharks. Good fun. I also will drive my boat through tough summer squalls just for the challenge and thrill of it.

I was thinking about my post a week or so ago about federally-subsidized flood insurance, and why it provoked so much response. I am not insensitive to the pain, chaos, and tragedy of seeing one's home damaged or destroyed. However, I want to focus on the policy issue which, in effect, enables - encourages - these things to happen.

Why? Because it seems to me that it's a provocative issue not so much about flooding but because it is related to the proper role of government vis a vis the private sector and the power of nature - and of human-nature - itself.

Government interventions usually distort markets, sometimes in the ways government policy hopes they will and, very frequently, with unintended (but predictable if you have half a brain) consequences. The Army Corps of Engineers has spent huge bucks over the years on Mississippi levees to prevent flooding. As a result, Delta farmlands in states like Mississippi no longer receive their regular dose of nutrients, flooding is worse when it does occur, and the environmental and property damage to the Louisiana delta is ongoing. It's entirely predictable. The levees prevent the mighty river from using its flood plains - and much of New Orleans was constructed, foolishly, but they didn't care at the time - below sea level.

Before LBJ passed federally-subsidized flood insurance, construction in flood-prone areas was limited to those who were able to obtain (expensive, and rightly-so) private flood insurance, or people who didn't care. People who built on beachfront, near marshes or river flood plains, tornado alley, etc., expected the worse to occur sooner or later, and took the risk or bought insurance on the free market. Before then (and before wetlands protection laws), construction on wetlands landfill (now illegal) or near beaches and rivers was at your own risk, mostly. "Acts of God" were excluded from homeowner's insurance without additional riders and naturally, flood-prone areas also had lower property values to reflect the risk and the occasional unpleasantness.)

Federally-subsidized flood insurance (designed to subsidize developers doing risky water-proximate construction) has had the effect of encouraging reckless behavior and, at the same time, enabled the development of fragile and ever-changing water-related habitats that would have been better left alone.

But what does the developer care? He builds, sells, profits, and leaves. Eventually, water goes wherever it wants to go and every human knows that. The consequence of living near water is that Nor'easters like Sandy, hurricanes, etc. are more damaging to property than they have have been historically in the US. Historically, for examples, Sandy Hook, New Jersey, waterfront, the Rockaways, and the North Carolina barrier beaches had, at most, rustic shacks which washed away with every big storm.Now, people build permanent residences and complain to the government when they get washed away or flooded out.

Risk is incentivized by not paying free market rates. Risky life choices (eg smoking, living in a forest-fire area, DUIs, drug abuse, having a home without fire alarms and fire-extinguishers, sky-diving, having a home with antiquated electric, living 50 miles from a fire department, piloting small airplanes, mountain-climbing, driving race cars, etc etc) have a market cost reflecting the risk taken and most of the time they do when people chose to buy insurance. Actuaries are statistical geniuses and very good at calculating and costing-out the risks of almost everything people do - which is why they make big bucks. In free markets, you can insure anything if you want to. Lloyd's will even insure an opera diva's larynx.

My solution to federally-subsidized flood insurance is similar to what my solution would be to many government-induced unintended negative consequences: phase government out of the way entirely and let free markets and nature work their will. Much misery and catastrophe would be eliminated that way in the long run. It's not about compassion. It's about facing reality honestly.

(NB: I am opposed to government wildfire suppression so I guess this makes me an environmental radical, or something heartless. The local fire department is fine with me, however, so you cannot call me an anarchist. I also oppose the mortgage interest tax deduction. Just a covert subsidy to the construction biz.)

"Historically, for examples, Sandy Hook, New Jersey, waterfront, the Rockaways, and the North Carolina barrier beaches had, at most, rustic shacks which washed away with every big storm. Now, people build permanent residences and complain to the government when they get washed away or flooded out."

There's more truth to this than one may even expect. Take a look at Google Earth's timeline along the mid/south Atlantic seaboard - just 20 years ago vs. today and one will see millions upon millions in construction in a region well known for it's severe weather...
a reality that does make me chuckle when I read the "climate change is real 'cause of increased storm damages" bits that run after every TS/hurricane.

Flooding. Recent Iowa floods. In the event of floods should we feel sorry for those who are flooded? those who are nearby but not flooded? If you expect floods in the flood plain, you expect the value of property to be suppressed. The price differential should approximate the difference in losses when floods come. If the differential is too low people will continue to buy the hillside houses. If you have a flood that is not as serious as expected, the people in the flood plain got a benefit and those on the hillside paid too much. So, who you feel sorry for depends on what was anticipated. Suppose we start taxing the people on the hillside and use it to relieve those in the flood plain. Depreciates value of hillside property, more people will want to live in flood plain and will build bigger houses there and stocking them with better furniture; likely to have more newsworthy floods. Often people know that a flood is coming; if they know their damages will be covered by those on the hillside they have less incentive to pack up their belongings. John Stossel report on buying a house on NJ coast and puzzled to be covered against hurricanes by Federal subsidy even though hurricanes are known to come around. Law of unintended consequences. Benefits of these programs get capitalized and end up helping nobody. Can end up with no gains to the property owners. Anticipated flow of benefits of $20,000 by government would get captured in the value of the properties.

I essentially agree with you but I do not believe such a policy would be politically palatable. I would suggest just removing the federal government from the equation by altering disaster relief programs to become loans to the appropriate state at a low but market rate interest (fed funds rate or the like). If states wanted to borrow this money to lend to people living in a flood zone the state could do so.

I doubt this would happen. However, funds would be available for states to borrow to help rebuild actually necessary infrastructure.

It is not everything you would like but I suspect it would get you most of the way to your goal.

All you have to do to become an opponent of wildfire suppression is to read books on complexity science. The unintended consequences of these programs are horrendous. It's all designed to protect homes of wealthy people - let them get wildfire insurance!

Young Men and Fire is a great book on the dangers of this policy. It was many years until Smokejumpers lost more of their people. I remember reading the book, hearing it was the last time a group had died and thinking they were overdue. Sure enough, shortly afterward, 8 died in a fire on a hillside despite taking all the new protections which were available.

We grow to bold in our belief we can protect ourselves from all potential danger - and open ourselves up to new dangers.

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